Fred Meyer, a veteran real estate broker, helps buyers find property in the vicinity of Harvard University, a high-cost area where it’s tough for many purchasers to locate a property they can afford. But through the years, he says numerous clients have landed exceptional deals on houses occupied by tenants.
“Houses that are rented are hard to show and can’t be staged to bring out their best the way owner-occupied properties can. That means there’s less competition among buyers, which can sometimes translate to a below-market price,” Meyer says.
Though some rented houses are true fixer-uppers, others are simply messy and need only surface upgrades such as interior painting or in-depth carpet cleaning.
Those rare buyers who can envision the potential of a house with merely superficial problems are often richly rewarded on price, according to Meyer.
Meyer recommends that buyers with affordability challenges open their minds to the possibility of purchasing a rental property that needs a limited amount of work.
“If you’re handy, this could be a very good buy for you,” he says.
Here are a few pointers:
1 Plan your visit to the place when the tenants are absent.
“Some renters are extremely angry that they must uproot. To get back at their landlord – and try to sabotage a potential sale – they’ll leave the house in a very messy condition and make comments designed to drive away buyers,” says Sid Davis, a real estate broker and author of “A Survival Guide for Buying a Home.”
Some tenants exaggerate small issues and may even claim a house has problems that don’t exist.
2 Make sure you obtain an in-depth home inspection.
To find a good inspector, Davis recommends you ask your agent for the names of at least 10 candidates. Then interview three by phone before choosing.
“It’s a very bad idea to select any inspector who’s in the home-improvement business. This represents a major conflict of interest, especially if the inspector tries to persuade you to also hire him for repairs,” Davis says.
3 Obtain cost estimates for necessary repair projects.
Davis, who once owned six rental houses, learned that tenants often fail to tell the landlord about problems unless they become serious.
“The people living in the house could be aware that the dishwasher has been malfunctioning for months. But the landlord will never hear about the problem until a home inspector determines that the dishwasher leaks and must be replaced, along with the flooring underneath,” he says.
4 Seek out a diamond in the rough.
“Because of the stigma attached to rented houses, you can sometimes get a terrific deal because the pool of willing purchasers is relatively small. All you have to do is think past the stigma,” Davis says.